The VA Interest Rate Reduction Refinance Loan (IRRRL) is available to qualified veterans who currently have a VA home loan, and allows them to refinance at a lower rate.
By lowering the interest rate with a VA Interest Rate Reduction Refinance Loan, the monthly payment can be lowered. A veteran can also refinance an adjustable rate mortgage (ARM) into a fixed rate mortgage with an IRRRL.
The VA does not set a cap on the amount borrowed with an IRRRL, but the limits on the amount of liability VA can assume usually affects the amount of money an institution will lend.
The loan limits are the amount a qualified Veteran with full entitlement may be able to borrow without making a down payment. These loan limits vary by county, since the value of a house depends in part on its location.
The basic entitlement available to each eligible Veteran is $36,000. Lenders will generally loan up to four times a Veteran’s available entitlement without a down payment, provided the Veteran is income and credit qualified and the property appraises for the asking price. See Loan Limits for more information about the limits in your county.
The IRRRL must be a VA to VA refinance, and it will reuse the veteran’s original entitlement. Thus, an IRRRL can only be used to refinance a property on which veterans have already used their VA loan eligibility.
Facts and VA Suggestions:
- A Certificate of Eligibility (COE) is not required. If you have your Certificate of Eligibility, take it to the lender to show the prior use of your entitlement.
- No loan other than the existing VA loan may be paid from the proceeds of an IRRRL. If you have a second mortgage, the holder must agree to subordinate that lien so that your new VA loan will be a first mortgage.
- You may have used your entitlement by obtaining a VA loan when you bought your house, or by substituting your eligibility for that of the seller, if you assumed the loan.
- The occupancy requirement for an IRRRL is different from other VA loans. For an IRRRL you need only certify that you previously occupied the home.
No appraisal or credit underwriting package is required when applying for an IRRRL.
- An IRRRL may be done with “no money out of pocket” by including all costs in the new loan or by making the new loan at an interest rate high enough to enable the lender to pay the costs.
When refinancing from an existing VA ARM loan to a fixed rate loan, the interest rate may increase.
- No lender is required to give you an IRRRL, however, any VA lender of your choosing may process your application for an IRRRL.
Veterans are strongly urged to contact several lenders because terms may vary.
- You may NOT receive any cash from the loan proceeds.
Since a new Certificate of Eligibility (COE) is not required, veterans should take their Certificate of Eligibility to show the prior use of your entitlement. Or, a lender may use the VA’s e-mail confirmation procedure in lieu of a certificate of eligibility.
VA Funding Fee
Veterans using the VA Home Loan Guaranty benefit generally pay a funding fee, which reduces the loan’s cost to taxpayers since a VA loan requires no down payment and has no monthly mortgage insurance.
The funding fee is a percentage of the loan amount, which varies on several factors. The VA funding fee may be financed or pay it in cash, but the funding fee must be paid at closing time.
The funding fee for second time users who do not make a down payment is slightly higher. Also, National Guard and Reserve Veterans pay a slightly higher funding fee percentage.
You do not have to pay the fee if you are a:
- Veteran receiving VA compensation for a service-connected disability, OR
- Veteran who would be entitled to receive compensation for a service-connected disability if you did not receive retirement or active duty pay, OR
- Surviving spouse of a Veteran who died in service or from a service-connected disability.
We love to help our veterans at Marimark Mortgage. If you haven’t refinanced your VA home loan to a lower interest rate, and you think you might qualify for an IRRRL, please contact us at your earliest convenience.